Selecting a charity to support is a bit like playing
God. Ideally, it should take into account your most deeply held
concerns and convictions.
Before sending in a donation to a group, you can now
consider how well it will spend your money by referring to the CharityWatch
Charity Rating Guide. Each organization
is listed by category with its phone number, financial performance
measurements and an overall grade (where enough information is available).
You can also review the ratings of other charities in the same category
to compare a particular group with those which do similar work.
The Guide indicates whether or not an organization
is eligible to receive tax-deductible contributions, noting those
charities which may have separately incorporated entities with a
different tax-deductibility status.
The Guide shows which groups are new or have
received an updated evaluation.
The Guide shows which groups have provided
CharityWatch the following documents (which we have requested):
annual report, complete audited financial statements, and Internal
Revenue Service Form 990 including applicable schedules. Donors
may want to consider an organizations accountability to CharityWatch
when making giving decisions.
Omission of charities from the Charity Rating Guide
or this web site does not imply a negative evaluation or rating.
Some groups receive large amounts of donated goods
and services. These items can be difficult to value and distort
the calculation of how efficiently a charity is spending your dollars.
Donated items are generally excluded from CharityWatchs calculation
of the following ratios:
PERCENT SPENT ON CHARITABLE
This is the portion of total expenses that is spent on charitable
programs. In CharityWatchs view, 60% or greater is reasonable
for most charities. The remaining percentage is spent on fundraising
and general administration. Note: A 60% program percentage
typically indicates a satisfactory or C range
rating. Most highly efficient charities are able to spend 75% or
more on programs.
When a range of numbers is given, the higher number,
in most cases, reflects the charitys own decision on how much
is spent on charitable program expenses. The mailings and phone
calls of these groups may serve a dual purpose: raising funds and
educating donors. However many of these groups consider such mailings
and phone calls to be largely educational and their costs to be
primarily program expenses. In some cases CharityWatch adjusts the
higher number. For example, CharityWatch may differ with a groups
decision that the cost of acquiring new donors or members is a program
service. Fundraising costs, i.e., direct mail and telemarketing,
are often factored in as program expenses. If you agree that fundraising
activities serve as a bona-fide educational or program purpose,
you may decide that this higher number reflects your goals.
The lower CharityWatch number assumes that all direct
mail telemarketing and solicitation costs are separate fund-raising
expenses and should not be included with direct program service
costs. If you do not consider any portion of a charitys direct
mail and telemarketing solicitations to be a bona-fide program or
if you are a new contributor and do not want to fund solicitation
campaigns, the lower number reflects your goals. (The CharityWatch
letter grade ratings are based on this assumption.) Please note,
however, that the work done by certain types of nonprofit organizations
may warrant a greater allocation of direct mail and telemarketing
costs to program expenses. Please see Exception
for Social Welfare Groups below for more details.
COST TO RAISE $100
This dollar amount reflects how much is spent to raise each
$100 of funds collected. In CharityWatchs view, $35 or less
to raise $100 is reasonable for most charities. When a range is
given, the lower amount usually reflects the charitys own
decision on how much direct mail and telemarketing costs are bona-fide
fundraising expenses. In some cases, CharityWatch adjusts the lower
number to reflect its different view on whether an item is a fundraising
expense. The higher CharityWatch number assumes that all
(please see Exceptions for Social Welfare
Groups below) direct mail and telemarketing solicitation
costs are fund-raising expenses.
CharityWatch helps you to judge the fundraising efficiency
of a charity by comparing fund-raising expense with related contributions,
i.e., money that was brought in as a result of fundraising activities;
whereas many charities compare (by pie charts or ratios) their cost
to raise money with total income, which can include patient revenue,
investment income, sales proceeds and other items that are not affected
by fundraising outlays. This erroneous comparison often makes a
charitys fundraising efficiency appear better than it actually
is. The following comparison illustrates this point:
$1,000,000 total income
Using this formula, a charity can claim that only
10% of its total income was spent on fundraising. This percentage
may look great in a charitys promotional material but it is
not a meaningful measurement of fund-raising efficiency.
$200,000 related contributions
Using this formula, one can see that Charity X has
a fund-raising efficiency of 50% or that it costs the charity $50
to raise $100. This ratio is useful because it tells donors how
much a charity is spending to obtain your contribution and how much
is left to spend on charitable programs and general administration.
FOR SOCIAL WELFARE GROUPS
The mailings and phone calls of social welfare groups that
are not eligible to receive tax-deductible contributions, identified
by the nt designation in the Charity
Rating Guide, may serve a dual purpose: raising funds and
recruiting/educating members to write their congressman or make
other attempts to influence legislation. CharityWatch counts up
to 30% of the cost of such mailings and phone calls as program expenses
in its lower number for % Spent on Charitable Purpose,
its higher number for cost to raise $100 and its overall
grade. Please note however, that many of these groups consider such
mailings and phone calls to be largely educational and allocate
over 30% of these costs to program expenses. These accounting differences
may cause lower overall grades for some social welfare organizations.
YEARS OF AVAILABLE ASSETS
This column shows how long a charity with large reserves
of available assets could continue to operate at current levels
without any additional fundraising. In CharityWatchs view,
a reserve of less than three years is reasonable and does not affect
a groups grade. When years of available assets are 3 years
or more, they are shown in a separate chart.
The letter grades for most charities are based on %
Spent On Charitable Purpose and Cost to Raise $100,
and assumes that direct mail and telemarketing solicitations are
fund-raising costs. (Please see Exception
for Social Welfare Groups above.) When a charitys
years of available assets are three years or more, their grade is
reduced and reported in a separate chart.
Groups with years of available assets
of more than five years are the least needy in CharityWatchs
view, and receive an F grade regardless of other measurements.
(Please see Charities with Large Asset Reserves
CharityWatch encourages each donor to consider these
factors and others, which you may feel are more significant, when
making charitable giving decisions. CharityWatch provides this information
to help you make your own decision concerning which charity to support.
The letter grades represent the opinion of CharityWatch.
A charitys rating is based solely on the above
criteria. The grades are:
| A = Excellent
|| B = Good
| C = Satisfactory
|| D = Unsatisfactory
| F = Poor
|| ? = Insufficient Information
When information is given only on the national headquarters
and the charity does not include its affiliates in its financial
statements, National Office or N.O. appears
after the groups name.
Does a charity's grade fluctuate much? Usually new evaluations
of charities do not result in more than a letter grade change, though
it is important to regularly check the grades of your favorite charities
because there are exceptions. For example, the grade of United
States Association for UNHCR (United Nations High Commissioner
for Refugees) went from A- to D to C to B
to C over a several year period.
WITH LARGE ASSET RESERVES
CharityWatch strongly believes that your dollars are most
urgently needed by charities that do not have large reserves of
available assets. CharityWatch therefore reduces the grade
of any group that has available assets equal to three to five years
of operating expenses. In CharityWatchs view, a reserve of
less than three years is reasonable and does not affect a groups
These reductions in grades are based solely
on the charities asset reserves as compared to budget. If
you agree with these charities that reserves greater than three
years budget are necessary to enhance their long-term stability,
you may wish to disregard the lower grades that CharityWatch assigns
on the basis of high assets.
The CharityWatch definition of years of available
assets includes funds currently available for the charitys
use, including investments that the charity has set aside as a reserve
but could choose to spend if it wanted to do so.
CHARITIES, UNITED WAY WORLDWIDE, VOLUNTEERS OF AMERICA AND UNITED
These groups are composed of hundreds of local organizations.
Each of these is governed by local volunteers and primarily raises
and spends money in their own community. CharityWatchs Charity
Rating Guide currently focuses on national organizations.
HOW TO LEARN MORE
After selecting your favorite charities, you can call or
write to them for a description of their mission, program activities
and recent accomplishments. (Phone numbers are provided in the Charity
Rating Guide and addresses can be found on the Internet
or in the reference sections of most public libraries.) Insist that
the descriptions of program activities be clear and quantifiable
(for example, How many hungry were fed? or How much land was protected?)
and coincide with the time period and categories of the financial
WORDS OF CAUTION
Charity financial reporting is inconsistent, unclear and
often incorrect. To form a basis of comparison, adjustments have
been made to the financial reports of some of the organizations
in this guide. For example, if a charity does a lot of direct mail
soliciting but includes only a small portion of its total postage
and printing in fund-raising expenses, then the CharityWatch rating
will reflect a larger share of these items in fundraising.